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r CITY OF RAMSEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,1996 Note 5. LONG-TERM OBLIGATIONS (continued) ' B. Description of LonE-Term Debt All of the City's outstanding debt is general obligation debt backed by the full faith and credit of the City. * Tax Increment Bonds -These bonds are issued for redevelopment and economic development projects. The additional tax revenue resulting from increased assessed valuation of the properties is the major source of revenue used to retire the related debt. In 1993 the City issued General Obligation Tax Increment Refunding Bonds Series 1993A totaling $2,225,000. The proceeds of this bond issue were used to refund the 1997 through 2007 maturities totaling $2,150,000 of the City's $2,800,000 General Obligation Tax Increment Bonds Series 1987A. The refunding was accomplished by means of a "crossover" mechanism. At the time of settlement, all proceeds were placed in an escrow account from which the pre-crossover interest on the Series 1993A Bonds was paid. The City continued to pay debt service on the Series 1987A Bonds through February 1, 1996, on which date the remaining principal of $2,150,000 was paid from the escrow account. On August 1, 1996, the City began paying debt service on the refunding bonds. The refunding reduced the City's total future debt service payments by $354,054, and resulted in a present value savings of $257,330. In January 1996, the City issued $330,000 of General Obligation Tax Increment Refunding Bonds, Series 1996A. The proceeds were used to advance refund $310,000 of the City's General Obligation Tax Increment Bonds, Series 1987B, which were called on February 1, 1996. This refunding reduced the City's total future debt service payments by $38,019, and resulted in a present value savings of $26,585. * special Assessment Bonds -These bonds were issued to finance various improvements and will be repaid ' primarily from special assessments levied on the properties benefitting from the improvements. However, some issues are partly financed by ad valorem levies. * Liability for Compensated Absences -The liability represents vested benefits earned by Governmental Fund employees through the end of the year which will be paid or used in future periods. -20-